RAINBOW VANIJYA PVT LTD.,NEW DELHI vs. ACIT, KOLKATA

ITA 1891/KOL/2025Status: DisposedITAT Kolkata31 December 2025AY 2020-2112 pages
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What did the Tribunal hold?

The Tribunal held that the CIT(A) exceeded his jurisdiction by enhancing the assessment by ₹66,12,43,517/- on account of alleged bogus purchases, as this was beyond the subject matter of the appeal and on a different head. The Tribunal found the CIT(A)'s enhancement to be unsustainable as it was made without bringing any material on record or conducting further enquiry, and by relying on a distinguishable case (PCIT Vs. Konak Impex Ltd.). The Tribunal noted that in the Konak Impex case, the assessee was non-cooperative, whereas the present assessee was fully compliant. The Tribunal also observed that the AO had not rejected the books of account under section 145(3) and had not established any nexus between the assessee and alleged unaccounted purchases. The Tribunal referred to a co-ordinate bench decision in LS Contracts Pvt. Ltd. vs. DCIT, which held that purchases supported by e-way bills cannot be treated as non-genuine. Given that the e-way bills in the present case showed direct delivery of goods to customers, the Tribunal concluded that the purchases were not bogus. The Tribunal directed the AO to estimate the profit element from purchases not made by way of e-way bill @ 6%, subject to verification, but ultimately deleted the addition made by the AO and the enhancement by the CIT(A), allowing both issues raised by the assessee. The Tribunal stated that the AO was not justified in making an addition without rejecting books of account and establishing a nexus, and that the CIT(A) enhancement was not tenable without further material or enquiry. The Tribunal found the addition made by the AO uncalled for and unsustainable as it was an estimation without rejecting books of account, and the enhancement by the CIT(A) was also not tenable.

What were the facts?

The assessee, Rainbow Vanijya Pvt. Ltd., filed its return for AY 2020-21 declaring a loss. The case was selected for scrutiny due to high liabilities compared to low income, identification of high-risk billers, and substantial investments/advances. The Assessing Officer (AO) initially proposed an addition of ₹64,47,79,406/- for bogus purchases from three parties. Subsequently, the AO alleged the assessee was an accommodation entry provider and proposed adding 1% commission on purchases, sales, and loans/advances. The AO ultimately made an addition of ₹1,33,61,982/- at 1% of the aggregate of these items. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who enhanced the assessment by ₹66,12,43,517/- by adding the entire purchases, holding them to be accommodation entries. The assessee is now appealing this order.

What were the issues?

1. Whether the CIT(A) exceeded his jurisdiction by enhancing the assessment by ₹66,12,43,517/- on account of alleged bogus purchases, when the AO's addition was ₹1,33,61,982/- on account of commission, and the enhancement was on a different head/source than the subject matter of appeal. - Assessee's contention: The CIT(A) enhanced the assessment beyond the scope of the appeal and on a different basis than the AO's addition. - Revenue's contention: Not recorded. 2. Whether the CIT(A) was justified in confirming the addition of ₹1,33,61,982/- made by the AO as commission received on accommodation entries (1% of purchases/sales/advances). - Assessee's contention: The assessee is a 'Pacca Arahitya' engaged in business, maintaining audited books of accounts and filing GST returns. Purchases aggregating ₹66,12,48,517/- were made and corresponding sales of ₹66,79,51,656/- were effected, with a profit of approximately 1%. Goods were directly delivered to customers, supported by e-way bills, purchase bills, and transport documents. The AO acknowledged goods were shipped to third parties. The AO and CIT(A) did not treat sales or loans as bogus. The AO's addition was based on surmises and presumptions without independent enquiry or rejecting books of account. The CIT(A)'s reliance on PCIT Vs. Konak Impex (India) Ltd. is distinguishable as the assessee in that case was non-cooperative, unlike the present assessee who provided all details. The assessee also provided confirmations of accounts and debtor ledgers. The addition was made without rejecting books of account under section 145(3) or establishing a nexus with alleged unaccounted purchases. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 142(1),Section 143(3),Section 144B,Section 44AB,Section 145(3),Section 69C

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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)"] dated 30.07.2025 for the AY 2020-21.

There are two effective issues raised in the various grounds of appeal, which are as under:- i. The assessee has challenged the order of Id. CIT (A) enhancing the assessment by ₹66,12,43,527/- on account of alleged bogus purchases without doubting the sales recorded the books of accounts and thus, the Id. CIT (A) has exceeded the juri iction since, the addition made by the Id. AO was ₹1,33,61,981/- in respect of commission earned out of books of accounts and the en

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